|Topic:||Overlooked opportunities in emerging markets|
|Organisation:||Cable & Wireless Worldwide|
Jim Marsh is CEO at Cable & Wireless Worldwide, and a member of the UK Operating Board. Mr Marsh joined Cable & Wireless through its acquisition of Energis where he was Director of Retail. Before joining Energis, Mr Marsh was Chief Operating Officer at Atos KPMG Consulting, overseeing the consulting business across all its industry sectors. Prior to becoming a partner at KPMG, he was head of strategic planning at Boots the Chemists. Jim Marsh is a qualified chartered accountant specialising in corporate finance and recovery.
Emerging territories such as Africa’s present huge opportunities for multinationals and the investment these companies can bring to these markets can be a significant factor in building emerging economies. Investment is often held back by the emerging regions’ generally poor telecoms infrastructure that is often unable to support operations. This is increasingly becoming an irrelevant concern in Africa, given the significant submarine cable investment throughout the region with five new cables due to go live in the next two years.
A wealth of opportunity The economic downturn is having a huge impact on businesses today and many companies are looking for sweeping cost reductions and increased efficiencies. Whilst the majority of companies are eager to make cost-savings where they can, they are also reluctant to ignore potentially lucrative global expansion. Global growth is a key strategic component for multinational corporations, but vital to this is a secure and effective telecoms infrastructure. Businesses are increasingly turning to managed telecoms services in order to gain a competitive advantage and make cost-savings, in turn allowing them to achieve their transformational goals. Emerging markets represent a wealth of opportunities for multinational companies and should constitute a crucial aspect of any global growth strategy. These economies are in much better shape than developed markets today and are likely to lead the world out of the recession. Current forecasts from Goldman Sachs suggest that China’s GDP is expected to grow by as much as 8 per cent compared to negative growth in Western countries. India’s GDP is projected to grow by 5.8 per cent this year. The growth potential of these markets is both high and well recognised. Recent research indicates that businesses are keen to capitalise on this potential: 68 per cent of multinationals surveyed felt that emerging markets are just as appealing as they were two years ago. Businesses considering expansion into emerging economies cited the associated lower running costs as a key driver – particularly as a means of countering the current economic conditions. Untapped potential Emerging territories can present huge opportunities for multinationals – in the same way, the investment they then deliver to that market can be significant. Africa’s economy has been performing well; the continent recorded overall economic expansion at an average of 5.9 per cent annually between 2001 and 2008. Although multinationals are keen to expand into China and India, it appears that many are missing a trick when it comes to Africa. Whilst 81 per cent of multinationals expressed an interest in moving into South Africa and 61 per cent into Sub-Saharan Africa by mid-2011, the research showed a surprising reticence from companies based in North America. Investment is being held back by what is becoming an increasingly irrelevant concern that telecoms infrastructure is poor and unable to support operations in Africa. Nevertheless, major companies have invested heavily in getting high-speed, high-capacity and cost-effective telecoms networks into the region. Now the infrastructure is much more advanced than many multinational businesses are prepared to give it credit for. Africa has seen significant submarine cable investment throughout the region with five new cables due to go live in the next two years. Included in these operations is the recently announced West Africa Cable System, the aim of which is to help improve the telecommunications infrastructure for local businesses in Africa as well as encouraging international businesses to move into the area, further supporting the growth of the local economy and benefiting the local community. Adoption of new communications technologies According to a report published earlier this year by the International Telecommunications Union, more than 50 per cent of the world’s population now uses a mobile phone and nearly one quarter has access to the Internet. These figures demonstrate the impact of developing countries and the rapid adoption of new communications technologies. Emerging economies now account for approximately two thirds of the mobile phones in use – a huge rise given that they were responsible for less than half in 2002. Internet use has more than doubled – 23 per cent of people had access to the Internet last year compared to only 11 per cent in 2002. The long-term value of ‘responsible’ business when investing in newer economies is fast being realised by multinationals and many parts of sub-Saharan Africa in particular are looking to the corporate sector to help them address issues of inclusion, inequality and health. Within the next two years the African continent will become better connected to the rest of the world than ever before with undersea cable networks due to come into operation that will increase the combined international bandwidth capacity into sub-Saharan Africa 120 fold by the end of 2011. What will it mean to Africa? After years of reliance on satellite broadband connections, international bandwidth capacity into sub-Saharan Africa is set to increase by 120 times by the end of 2011. West Africa currently receives its bandwidth through the existing cable, which traditionally has been expensive for users because of the shortage of options available to the end user, resulting in something of a monopoly. Now, a consortium of leading global telecoms companies plans to provide a high-speed fibre optic network that will link Southern and Western Africa to Europe with faster and more cost effective connectivity. The 3.84Tbps West Africa Cable System (WACS) connecting more than 13 countries will provide the first ever international submarine connections to Namibia, The Democratic Republic of the Congo, The Republic of Congo and Togo. Once the WACS cable has been deployed, customers will benefit from reduced costs and an easier path to up-scaling bandwidth. WACS, as well as other new cable systems, will revolutionize broadband in Africa, which has not kept pace with the rest of the world. Users will enjoy greater choice and the cable systems will lead to further infrastructure development, especially in the business sector. WACS will also overcome the issues involved with deploying broadband over satellite. In addition, in July, the East African region announced that an undersea fibre-optic cable linking it to networks in Europe and India went live. The Seacom cable, which is owned mainly by African investors, links South Africa, Tanzania, Kenya, Uganda and Mozambique with London, Marseille and Mumbai. A separate undersea cable, known as Teams, owned by the Kenyan government and local telecoms firms and linked to the United Arab Emirates, is expected to go live in August 2009. The future of emerging markets Original predictions that emerging markets would extricate themselves from Western economies because they are not as exposed to the debt faced by Europe and the US were proven wrong by the global market crash. However, it is still widely held by experts that this will protect emerging economies to the extent that they will be able to recover more quickly. Inaccurate assumptions about emerging markets such as Africa, will lead to businesses missing out on the benefits offered by expansion, and – perhaps more worryingly – the emerging markets will miss out on vital investment that would improve standards of living across the continent.